Auto Bailout, yea or nea?

[blondboinsd]

I'm in the reluctant Yay group because I think it would really wreak havoc on the US workforce during this difficult time. I do ask if it will keep the failure from happening (A-La Chrysler in the 80's) Or be another bailout that get used for stock dividends, time will tell! Oh crystal ball where are you!

I say without the reality thrown in a HUGE nay but I can't ignore the untold major economic impact it would cause.

I think GM's vehicles suck, they can't make a good generic vehicle that isn't 50% of it's Toyota/Nissan etc equivalent. I recently helped my aunt buy a new Nissan Altima and we looked at the Malibu for a SECOND. They need to get their head out of their you-know-what and face reality and create a car of quality, dependability and personality.

On another note, I feel Ford Motor Company has done all the 3 above, their latest offering (Fusion, Milan, MKX, Flex etc) are really good vehicles that I've been impressed with over and over again. They offer a great interior with a lot of bells and whistles combined with interior/exterior quality that is up to par with Toyota/Nissan/Honda.

Just my 2 cents

and don't get my started on Chrysler, I just ate lunch.

[LeMansX5]

Originally Posted by AzX5

I give it a big nea. All it will do is postpone the day of reckoning another 6 months or so. If they fail, the jobs will move to Honda, Toyota, BMW, Nissan, etc., which all have huge plants in the U.S., but without the union dead weight.

They need to cleanup first. No blind checks from taxpayers money.
The banks have not started lending and some are misusing the bailout money.

[E61Silver]

I hear that the unions are unwilling to give any concessions?

[FSETH]

The way I see it we are already writing the $700 billion check anyway, so why not give some of those funds to the auto industry, which employs a huge number of workers. What is the difference of giving it to the crooks of Wallstreet or the CEO's of the big 3? Neither of them personally deserve it, IMO, but if it will help our economy then why not let the auto industry have some? It is a very small percentage of the total bailout. Detroit and other industrial cities across the country are currently plagued with home foreclosure and so on. Maybe by bailing out the big three we can keep some of those people who work at the plants in their homes and that in turn may help the real estate market and so on.

[lakai]

Average cost per man hour to build a GM car = $76
Average cost per man hour to build a Toyota = $48

Let them fall, Let the Unions deliver a death blow to themselves while they file chapter 11 and come up with a new plan. Then throw tax payer money at them.

[LeMansX5]

Originally Posted by lakai

Average cost per man hour to build a GM car = $76
Average cost per man hour to build a Toyota = $48

Let them fall, Let the Unions deliver a death blow to themselves while they file chapter 11 and come up with a new plan. Then throw tax payer money at them.

Where did you get those #s?
GM needs $14 billion per month to cover operating expenses(wonder what it is for Toyota). The bailout will have to be big.

[Wagner]

Consider this when you're against the 25B loan of the 700B allotted.

--

How many jobs are at stake?

GM (GM, Fortune 500) has about 120,000 U.S. employees. Ford (F, Fortune 500) has about 80,000 and closely-held Chrysler LLC has about 66,000.

In addition, the three automakers have about 14,000 U.S. dealerships that between them employ another 740,000 workers.

The suppliers used by the Big Three also employ an estimated 610,000 people.

Add that up and you have more than 1.6 million jobs tied to the auto industry.



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You think that many people being unemployed wouldn't hurt? I'm curious why no one has told the UAW that instead of 2010 for changes, it now has to be 2009??

The automakers are asking for about $25 billion in loans to help them survive until 2010. Advocates for a bailout argue that if the Big Three can hang on until then, they'll be in position to be competitive long-term.

That's because billions of dollars in annual savings won in the 2007 labor agreement with the United Auto Workers union kick in that year, including shifting the responsibility for retirees' health care costs to union-controlled trust funds.

How about this idea GM, sell off some of your damn branches!! Ford is unloading Mazda and ownership in Suzuki...what is GM doing?

What happens if there's no bailout?

GM risks running out of money later this year or early in 2009 without a bailout.

GM burned through $6.9 billion during the third quarter, leaving it with only $16 billion on hand as of Sept. 30. But it needs $11 billion to $14 billion to continue normal operations.

Ford and Chrysler have more cash relative to their needs, mostly from money they borrowed prior to the current credit crunch.

But each of those automakers could also run out of cash during 2009 without federal assistance.

And for all the Chapter 11 fans.....not so much

What are the arguments against a Chapter 11 bankruptcy?

Given the current credit crunch, many experts question whether automakers would be able to get necessary financing from lenders to help them during the reorganization process.

There are also doubts whether consumers would buy new vehicles from a bankrupt automaker due to concerns over their resale value and warranty. In effect, an automaker that files for Chapter 11 could eventually wind up going out of business anyway.

And the kicker.................

What are some of the other broader economic impacts if an automaker goes out of business?

Nearly 2 million Americans get their health insurance directly from one of the Big Three automakers. Most of them would lose that coverage if their company goes out of business.

A failure of one of the Big Three could also cause a string of bankruptcies among suppliers. And beyond the job losses at the automakers, dealerships and suppliers, media companies that generate a lot of revenue from auto advertising as well as retailers in towns where plants are located could also have to cut many jobs.

[NOVAX5]

$700,000,000,000 divided by $100,000,000 households. $7000 each household. thats what i call bail out. the money will be spent and back to the government anyway. dont bail out banks and automakers, people pay high interests to banks on mortgages, auto loans and now they have to use our tax money to pay them even more when they are in trouble? no politics its just a simple one plus one equal two reasoning.

[LeMansX5]

I read somewhere that GM wants to offload Hummer and Ford wants to offload Volvo in addition to Mazda.

[LeMansX5]

From NY Times- Dealbook

Why G.M. Needs an Orderly Chapter 11

November 18, 2008, 7:15 am
Taxpayers shouldn’t fork over a cent to General Motors, Andrew Ross Sorkin argues is his latest DealBook column, noting that G.M is using money so quickly that a $10 billion infusion made today would disappear by February.

Instead of giving the ailing automaker a loan to get them over this “rough patch,” Mr. Sorkin says, the government should shepherd G.M. into an orderly bankruptcy, so that the company can begin a much-needed reorganization.

The goal — one aided by government involvement in a debtor-in-possession loan and a warranty guarantee fund — is to guide the carmaker into a Chapter 11 restructuring, not a Chapter 7 liquidation.

Tony Cervone, a spokesman for General Motors, has a warm and friendly way to summarize his ailing company’s ongoing dance with disaster.
“The fact is we’re looking at a short-term liquidity crisis that needs a bridge loan,” Mr. Cervone said this weekend to The Detroit Free Press.
To him, G.M. is merely in a temporary bind. If the government — that is, taxpayers — were just willing to spot G.M. some cash to get it over this little rough patch, everything would be just fine.

Mr. Cervone’s comment reflects what’s wrong with the mind-set in Detroit.
G.M is using money so quickly that a $10 billion infusion made today would disappear by February. That is why taxpayers shouldn’t fork over a cent, at least until shareholders are wiped out, management is tossed out and the industry is completely reorganized.

But there is a fix. Call it a government-sponsored bankruptcy, a G.S.B., if you will. It might sound a bit like an oxymoron, but it is an idea that has been quietly making the rounds in Washington. It makes a lot of sense.
Here’s how it could work:
First, let’s recognize that G.M. doesn’t need life support. What it needs is Chapter 11. The bankruptcy process is not a bad thing — indeed, it should be embraced. Bankruptcy allows companies to do tough things they could never do in the normal course of business. It has helped many companies turn themselves around and come out even stronger.
Bankruptcy would give G.M. enormous leverage with its debt holders — and, perhaps more important, with the U.A.W., whose gold-plated benefits are one reason G.M. is no longer competitive. A bankruptcy filing would also give G.M. the cover to close plants, rid itself of unprofitable brands and shed dealerships. In fact, unless G.M. files for bankruptcy, state laws would make it prohibitively expensive to shut dealerships.
So, first, the government would force G.M into a prepackaged bankruptcy now — even before policy makers may think it needs to be. As an inducement, the government would allow the merger with Chrysler to go forward. (There’s a lot of resistance to saving Chrysler too, but we need to look at the industry as a whole. And don’t worry: Cerberus, the private equity firm that owns Chrysler, would have its equity wiped out too.)
The merger should reduce costs by as much as $7 billion. But that’s not the tough stuff. The harder decisions are these: Both companies would have to jettison brands — lots of them. In the case of G.M., frankly, the only ones worth saving are Cadillac, Chevy and Buick. (Buick? Yes. Despite its lackluster sales and fuddy-duddy image in the United States, it’s a huge seller in China.)
That means Saturn, Pontiac, GMC and Saab would all disappear. Deutsche Bank estimates that reducing G.M.’s brands from eight to three would bring down the company’s cost base by $5 billion annually. If you’re able to shut the dealerships too, lop off another $4 billion. Chrysler is an even sadder situation: the only brand with any value is Jeep. Its Dodge Ram truck lineup could be merged with Chevy, which would also pick up pieces of the GMC business. And Chrysler’s minivan business could be combined into the Chevy brand as well.
In all, the 35 plants of G.M. and Chrysler would probably be cut by half.
Then the auto workers, whose benefits are off the charts.
G.M. currently employs about 8,000 people who actually don’t come to work. Those who do go to work are paid about $10 to $20 an hour more than people who do the same job building cars in the United States for foreign makers like Toyota. At G.M., as of 2007, the average worker was paid about $70 an hour, including health care and pension costs.
Those costs are already coming down slightly because of a renegotiated deal with U.A.W. last year, but not nearly enough.
Part of the problem is summed up by comments like this one in The Detroit Free Press, made by Kandy O’Neill, 39, an assembler at G.M.’s plant in Lake Orion, Mich., where she builds the Chevy Malibu and Pontiac G6. “I think we’ve given enough,” she said about the cuts to her salary and pension plan.

“Everybody wants to come down hard on the workers,” she said. “Nobody knows what we do inside there but the people who work there. It’s hard. It is not an easy job.”

When you read a line like that you might sympathize with her, but then you realize that nothing can be accomplished without bankruptcy. Ms. O’Neill: your company is asking the taxpayers — many of whom don’t have health care coverage — to pay your salary and health insurance.
And then we need these companies to agree to serious, strict enforcement of gas mileage standards. They should be producing the cleanest cars on the street. We may lose hundreds of thousands of jobs in this industry in the near term, but with the right kind of innovation, we should have millions of new jobs in the next 10 years.

Finally, we need to kick out management. That Rick Wagoner, chief executive of G.M., can say with a straight face that he still deserves to run this company is laughable. It would be impossible for him to put in place the serious changes that need to be made because he carries too much baggage. He’d have to undo years of his own neglect.
After all that is agreed, and only then, the government should come in with what’s known as debtor-in-possession financing to help the company through the bankruptcy process. Ideally, the government would be a “seed investor” and others would join it.
The goal should not be to keep these companies from filing Chapter 11, but from filing for Chapter 7 — which would mean liquidation.
With the debt market virtually closed, this is the time the government can come in and try to help. But to jump in front of the train now, without the requisite changes made to the industry first — which we all know can’t be done without Chapter 11 — would be foolish.
The automobile industry has argued that bankruptcy will be a disaster for the industry; that people won’t buy vehicles while they’re in bankruptcy for fear that the warranty won’t mean anything. There’s a fix for that too. The government should establish a warranty insurance fund that would insure the warranties of all G.M. and Chrysler vehicles bought while the combined company is still operating under bankruptcy protection. The cost to taxpayers should be next to nothing, assuming the company survives and can takeover the warranty obligations.

The government also should consider using some of the money for the financial industry rescue not to save the companies, but to retrain employees in the Detroit area and help promote development of new industry. A lot of people complain about the role of government in business and free markets. But it is hard to complain about efforts to make the nation’s workforce more employable.

Barack Obama, on “60 Minutes” Sunday night, said that government assistance must be “conditioned on labor, management, suppliers, lenders, all the stakeholders coming together with a plan.” He said, “So that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere.”